2018 (4) TMI 675 - AT - Service Tax

Foreign bank charges on export proceeds not taxable

The Tribunal ruled in favor of the Appellant, following precedent that charges deducted by foreign banks from export proceeds were not taxable under ... Taxability - expenditure in foreign currency - amounts were deducted from export proceeds by the banks towards their charges - Held that: - the issue is covered by the decision in the case of M/s Dileep Industries Pvt. Ltd. Versus CCE, Jaipur [2017 (10) TMI 1231 - CESTAT NEW DELHI], where it was held that The foreign banks while remitting the money to the Indian Bank, deduct their charges for collection of bills which in turn are charged by the Indian Banks from the appellants. When it is so, then the appellant are not entitled to pay the service tax - demand not sustainable - appeal allowed - decided in favor of appellant. Issues:Taxability of charges deducted from export proceeds under Section 66A of the Finance Act, 1994.Analysis:The Appellant incurred expenditure in foreign currency as charges were deducted from export proceeds by banks. A show cause notice alleged that these charges were taxable under Section 66A of the Finance Act, 1994. The demands were confirmed along with penalties. The Appellate Commissioner upheld the adjudication order, leading to the present appeal.The issue was resolved based on a previous Tribunal order in the case of Dileep Industries Pvt. Ltd. The Tribunal held that charges deducted by foreign banks for bill collection were not taxable as service tax. The Tribunal emphasized that the foreign bank did not charge the Appellant directly, and the Indian bank paid the charges. Therefore, the Appellant was not the service recipient, and no service tax could be levied under Section 66A.Following the precedent set in the earlier decision, the Tribunal allowed the Appellant's claim. The Tribunal found the demands and penalties imposed on the Appellant were not sustainable based on the previous ruling. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential reliefs.In conclusion, the Tribunal ruled in favor of the Appellant, citing the precedent that charges deducted by foreign banks from export proceeds were not taxable under Section 66A of the Finance Act, 1994. The decision was based on the Appellant not being the direct recipient of the service, as clarified by the Tribunal's earlier judgment.